JF Apex Securities ' BUY ' TP RM 2.03

Investment Highlights

• Transforming into a significant medium to high-end developer. LBS Bina Group Berhad (LBS) has long been recognised as a low-to-medium cost developer. The Group has recently rebranded its corporate image and reposition itself to become one of the significant medium-to-high end property players after realising that its previous business model failed to withstand the financial crisis in 2008. We believe the stock will be back into investors' radar screen once it posts more convincing earnings this year and its successful launches of high-profile project, D'Island, in Klang Valley.
• Strong turnaround. LBS has successfully returned to the black in 2010 by achieving RM16.5m net profit against losses of RM17.2m posted in 2009 thanks to strong sales and higher margin achieved from its medium-to-high end projects. Going forward, we estimate the Group to record net profit of RM40.1m in 2011F, a whopping jump of 142.6% yoy and maintaining its profit momentum for 2012F and 2013F with net profit of RM83.4m and RM119.7m respectively.
• RM9.1b sizeable GDV to sustain the Group's earnings over the next 10-15 years. LBS has a total undeveloped land bank of 2,400 acres in Klang Valley, Cameron Highlands, Perak, Johor and China yielding total GDV of RM9.1b (ex-China). The Group targets to launch its flagship high-end project, D'Island, in Puchong in September 2011. The response for the pre-sales is encouraging with 90% take-up for the 122 units of 3-storey superlink houses being launched, pricing over a million or RM370-400psf.
• Strong unbilled sales. The Group has successfully chalked in about RM591m unbilled sales which provides earnings visibility of almost 1.7x of the Group's 2010 revenue of RM341m. Going forward, LBS is expected to continue to achieve impressive new sales with its strategy of focusing middle to high income level house buyers, which is less prone to rising cost of living.

Recommendation

Attractive valuation with potential 165% upside. Our non-rated target price for LBS is RM2.03, which is based on 50% discount to its RNAV/share of RM4.07 in view of LBS being a small cap stock. Our target price also implies 9.4x 2012F and 6.5x 2012F PER. Current valuations look attractive as it is trading at 7.4x 2011F and 3.6x 2012F PER, which is significantly lower than the sector average of 13-14x.